The Right Choice—What Does It Mean? Groundbreaking Research from the Early Days of Customer Value Management

Abstract

During the early 1980s, if one were to research the expressions, value management or value creation at your local library, 99 per cent of the articles and books would be on shareholder value. The only reference to customer value would be advertising articles that promised ‘new improved value’, marketing hype for consumer goods, such as larger sized laundry detergent boxes. Shareholder value management had 100 years of art and science for measuring and managing financials complete with standards and guidelines and government-mandated reporting rules and regulations. There were none to help businesses measure, manage or create customer value. Michael Porter from Harvard University just published his book on competitive strategy stating you can compete on quality or price, pick your competitive strategy. The early days of the world-wide quality revolution was in full swing. Quality was designed by engineers and measured by quality experts in the firm. If you asked anyone what the purpose of a business was the answer would be ‘to make money’ or ‘to create value for the shareholde’. But global competition was increasing. Customer choice was exploding. The customer was flexing his or her power of choice and voting not for either the best quality or the best price, but for both. They wanted the best value. Quality now would be measured by the customer perceptions in the marketplace not engineers or quality-control experts. Goodness of price would be determined by the marketplace. The resulting perceived value of goods and services would be judged by the customer. The real purpose of a business was becoming clear, to improve the quality of life and create value for the customers. Firms that did it best would thrive and survive. To win, business managers needed new concepts, tools and methods for creating and managing customer value. The following article is a 1989 paper that reported on some of the most significant findings in the early days of customer value measurement and management. It is based on one of the largest empirical data bases available at that time. AT&T was doing over 60,000 customer surveys per month. Three years of monthly findings were analyzed by some of the best researchers and scientists in the 300k employee and $85 billion annual revenue company. The paper presented empirical evidence of the power of the consumer's perception of customer value, its impact on market share, growth and customer loyalty and ultimately its impact on shareholder value and employee value. The paper was never published, but it was released throughout AT&T and also to AT&T's strategic business partners. Its content was presented and discussed at national conferences hosted by the American Marketing Association and the US Conference Board. Its findings have stood the test of time. It is published here for the first time. It is important to note that today AT&T is a completely different company from then in 1989. Since then the company split into three separate businesses, AT&T, Lucent and NCR. The portion of the business that kept the name later merged with another communications company.